Bank executives who are understandably peeved at being made to wait until 2016 for the reduction of interest withholding tax might consider whether there are any options to avoid this measure.One option might be to offer up an alternative tax saving to the Australian Government.And one such alternative saving is the 50 per cent income tax discount for interest income that will eventually come into force from July 2012.The tax discount will apply on up to A$500 of interest income in its first year and $1000 in subsequent years. The discount will exempt 50 per cent of eligible interest income up to the amount of the cap.The 2011 budget papers put the annual cost of this measure at $480 million, or more than twice as much as the cost of winding back interest withholding tax.The policy rationale for the tax discount on interest income is to encourage household saving in bank deposits and similar instruments.This was always a shaky rationale. In the past two years it has been over-run by the well-known shifts in savings behaviour observed in the monthly banking data from APRA, the quarterly national accounts, and the half-yearly financial reports of banks.Simply put, savings are through the roof, whether it's the slippery residual measure that pops out of the national accounts or the easily monitored measure of household savings held with banks.Studies have long shown that overall savings respond far less well to tax breaks than to various events in the real economy - financial liberalisation, government savings, demographics, productivity growth, etc. The events of recent years underline this, by showing savings moving quite independently of how they are taxed.The chart with this article shows per-person bank savings. They've moved a long way without tax changes.